Econ 101b: March 12 Lecture: Inflation and Unemployment

Lecture Audio

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• Review:
  • Understanding the IS Curve
  • Investment and the Real Interest Rate
  • The Task of the Federal Reserve
• Background:
  • Okun's Law and the Phillips Curve
• Federal Reserve Behavior:
  • The Taylor Rule and the MPRF
  • Equilibrium: The Phillips Curve and the MPRF
  • Understanding Fluctuations
• Expectations:
  • Static Expectations: π^e is constant...
  • Adaptive Expectations: π^e_t+1 = π_t
  • Rational Expectations: π^e_t+1 = E[π_t+1]
    • Expectations Spreadsheet: http://www.j-bradford-delong.net/2008_xls/20080306_101b_dynpcurve.xls